Chadwick Wasilenkoff, CEO Fortress Group holds a winning hand with new secure banknotes that his company produces. He was compensated to the tune of $15,999,938.00 in 2010, a 1117% increase over 2009, according to our data.Glenn Baglo
/ Vancouver Sun

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Executive Economic recovery delivered big pay raises to the executive employees of British-Columbia-based public companies in 2010, with the top 100 among them earning an average of $3.54 million, The Vancouver Sun has learned in its annual survey of executive compensation.

That represents a 35-per-cent raise from The Sun’s 2009 Top-100 list, and was driven by big increases in the value of share options and restricted or performance-share awards among a roster heavily dominated by B.C.’s strong mining sector. The list was also dominated by men, with only one woman — lululemon athletica’s CEO Christine Day at number 30 — making the Top 100.

The threshold to make the list saw a substantial increase to $1.41 million, compared with $1.2 million in 2009.

They are steep raises, but do reflect recovery in the resource sectors as well as some pressure to attract top talent in what are increasingly becoming global businesses.

“The real story, when we look at it, is 2009 was the anomaly, so really, 2010 compensation is coming back to 2008 levels, or slightly higher,” said Ailsa Forsgren, partner and leader for human capital in Western Canada for the consultants Mercer.

The top-paid executive on this year’s Top 100 was Fortress Paper Ltd. CEO Chadwick Wasilenkoff, who earned $16 million in 2010, a staggering increase from the $1.3 million he earned in 2009, but the lion’s share of it, $13.5 million, came from a one-time performance bonus.

And the No. 2 name on the list, Robert Quartermain, CEO of a startup gold-mining venture, Pretium Resources Inc., earned $12.73 million, but that came almost entirely from the conversion of his preferred share capital in the new firm into shares as a stock-option-based award.

Robert Friedland, Ivanhoe Mines Ltd.’s chairman and CEO, impresario of the massive Oyu Tolgoi copper mine in Mongolia, was third on the list at $10.3 million, Goldcorp Inc. CEO Chuck Jeannes was fourth with $10.02 million in total compensation and Telus CEO Darren Entwistle received a big raise bringing him to fifth on the Top 100 at $9.94 million.

In 2009, Friedland earned a total pay package of $8.52 million, for Jeannes it was $7.9 million and Entwistle’s was $6.85 million.

And not all the most highly paid executives presided over profitable companies. Some 44 on the Top 100 worked for companies that lost money, though Forsgren noted that is not necessarily problematic for resource companies that are still in the development phase.

“Profitability isn’t really the expectation of a lot of those companies,” Forsgren said, so compensation is linked more to whether or not a company is meeting development goals and the potential for future profits.

Friedland’s Ivanhoe Mines, for instance, lost $217.82 million in 2010; however, the company is in the process of building its Oyu Tolgoi mine on what it says is the world’s largest undeveloped copper deposit.

A total of nine executives on the Top 100 list saw pay cuts, led by NovaGold Resources Inc.’s CEO Rick Van Niewenhuyse, whose $2.04 million in pay represented a 63-per-cent decline.

However, 23 executives on the list saw their pay more than double thanks in large part to the swelling value of stock options and other share-based elements of compensation.

“Those are big, big numbers in terms of increases,” Laura O’Neill, director of law and policy at the research group Shareholder Association, Research & Education said.

“I look at a lot of U.S. companies and a lot of Canadian companies, and I’m certainly well aware that the numbers are up, but it’s interesting that it’s that much.”

Generally the biggest increases that the executives of B.C.-based companies saw came from bonuses and performance-based components such as the awarding of stock options and restricted-share or performance-share units, rather than salary, which O’Neill said is the way it should be.

However, she added, crafting pay “can be a delicate balance” for the compensation committees of companies in sectors subject to volatility, such as B.C.’s resource sector over the past two years.

For instance, O’Neill said, it is “very unwise” to link executive compensation entirely with a company’s share price.

Share price is an important measure, especially for shareholders, O’Neill said, but “you don’t want to see a rising tide lift all boats where the relative performance of executives hardly matters.”

Linking pay to aspects of company performance that are directly in the executive’s control, such as employee safety, environmental achievements or controlling costs, is one way of countering the effects of a soaring stock price.

Kai Li, a professor of finance at the Sauder School of Business at the University of B.C., said it is still important for companies to align the interests of executives with those of shareholders by making them shareholders themselves.

However, she added that it is becoming more common for companies to do so by issuing restricted or performance-based share units linked to company performance rather than stock options.

“Options provide a very short-term focus,” Li said “So now companies are starting to have restricted shares and the exercise of them is also linked to performance.”

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